• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

What problems have prompted countries of Eastern Europe to move towards a more market orientated economic system?

Extracts from this document...

Introduction

Year 12 Economics Essay a) What problems have prompted countries of Eastern Europe to move towards a more market orientated economic system? b) What problems have these countries encountered in the transition? Economies try to solve the basic economic problem that exists in the marketplace. Scarcity of resources in a world of infinite human wants. This causes the basic economic problem; resources have to be allocated between competing uses. To solve the problem the Government has to decide what will be produced, how will it be produced and for whom will it be produced. The answers to these questions depend on what economic system a government decides to operate. Countries in Eastern Europe wanted to move towards a more mixed economy which is a combination of market economies and command economies. In a command economy resources are allocated by the Government through careful planning. This means that the four factors of production (land, labour, capital and enterprise) are all controlled by the State. In market economy the government makes no economic decisions. These are made through the market which is the interaction between consumers and businesses. In a command economy goods and services can be over or under produced because of the difficulties in estimating demand. ...read more.

Middle

There are few incentives for workers to work hard and this results in low productivity. They cannot change jobs and promotion is difficult. Once you have been given a job it is yours for life. There is also small chance of you losing your job so workers put in little effort. In addition, individuals are taxed more for higher wages so there is no incentive to work hard. Market economies allow people to choose their own jobs and live their life their own way. This leads to high motivation and high productivity. Companies and businesses also have few incentives. For example, if they reach their target production rate their reward would be to be given a higher one next year. The system is often riddled with abuses of power and privilege meaning wrong decisions are made. As command economies only work with a bureaucracy, there are many people in positions of power. These people decide what is produced and sometimes they choose what they want as there is little choice in the market. A move to a more market orientated economy means giving the consumer more choice. It would allow competition, better prices and better quality products. ...read more.

Conclusion

Businesses that supplied machinery or the materials required, for the production of the good would suffer too. Everything in a command economy is owned by the state. This includes all the land and capital. So when an economy is in transition some of the states assets must be sold or privatised. This can be done in three ways. The first option is the state can give the land and capital away to the people currently employing them. This option is a very arbitrary way of sharing the assets; some capital could be more efficient than others. The second option is to sell the capital to the highest bidder. This sometimes caused problems as some of the businesses had to be closed because they were unprofitable. The last option is that they can split it fairly between all the countries citizens. This is quite a successful way of sharing the assets, as shown by the Czech Republic. The problems of lack of choice, bureaucracy and too high state intervention have prompted command economies to move towards a more market-orientated system. However transition isn't easy. Inflation may rise greatly, unemployment could also increase and businesses need to be privatised. However I think in the end these times of transition are worth it, it gives freedom of choice and in the end, a more balanced economy. Sophie Bradstreet 12JCh ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our GCSE Economy & Economics section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related GCSE Economy & Economics essays

  1. How do economic systems solve the problem of scarcity?

    However, their decisions also have many errors and plans do not always go as planned and many problems can occur. Governments can direct their resources into non-essential goods or for war, depriving their citizens from the more basic necessities. Sometimes governments can also forget some things in their plans, which can lead to big problems.

  2. What is the economic system?How does Australia's economic system attempts to solve the economic ...

    In this form of a mixed economy, the state becomes a major shareholder in private enterprises. An alternative is for the state to own some industries while leaving others in private hands. An economic system can be considered a part of the social system and hierarchically equal to the law

  1. The Quest for Optimal Asset Allocation Strategies in Integrating Europe.

    between different country indices, which jeopardises international diversification benefits as suggested by the mean-variance portfolio model first introduced by Markowitz. Many authors have therefore suggested that stock diversification strategies should concentrate more on the industrial composition of the portfolio. Accordingly, institutional investors in practice have started to change the structure of the traditional top-down approach to asset selection.

  2. Tax Policy in Europe

    Renting out your home > Running a bed and breakfast More and more people are working from home. If you're one of them, you might have to pay business rates on the part of the property you use for work.

  1. Chinese car market overview. Citroen case study

    OTHER ELEMENTS A better road network China boasts 1.3 million kilometres of road and 14 million vehicles. That means average road per vehicle is 90 meters. However, there are also 200 million bicycles, 30 million motorcycles, 15 million agricultural vehicles, 13 million tractors and 10 million horse-drawn carts.

  2. "Labour market inflexibility in Europe is the main reason why Europe is not as ...

    The concept of making labour markets more flexible came about in the European Commission's White Paper on "Growth, Competitiveness, and Employment" in 1994. The advent of the Euro was claimed to make labour markets more flexible. As top economist Michael Burda said, "My predication is that unless an improbable miracle

  1. Is there an economic case for strengthening the patent system in Europe? How strong ...

    The argument that patents motivate useful invention is unquestionably the most familiar theory about the economic function pf patents. Granting patents involves economic cost as well as potential benefits, therefore strong broad patents should not be granted light. Arrow (1962)

  2. Scarcity and Unlimited Wants.

    If just one more unit is made then total variable costs rise. Variable costs include the following: * Weekly wages paid to the shop floor workers. * The cost of buying raw materials and components. * The cost of electricity and gas.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work